[V]ermont’s Senate leader has joined the state’s tech community in opposing a proposed tax on “cloud” software that would be levied as part of the House’s clean water funding plan.
The proposal, a six percent sales cloud software—software programs stored and accessed by users over the internet—is projected to raise $6 million, and passed the House with broad bipartisan support last week.
But the Vermont Tech Alliance has urged senators to reject the tax over concerns that it will increase the cost of doing business, and stifle a burgeoning tech sector.
In a letter to senators, Jeff Couture, the alliance’s executive director, said the tax is a “disincentive to the growth of tech businesses and jobs in the state.”
“Vermont cannot afford to have another reason not to base a tech business in Vermont,” Couture wrote. “Instead, Vermont should be promoting itself as a state that does not have a cloud computing tax and use it as an advantage for attracting and keeping tech businesses.”
In an email to business leaders on Saturday, Sen. President Pro Tem Tim Ashe, D/P Chittenden, said he has opposed the cloud tax since 2011, when it “first emerged” as an issue in the state.
“Back then I said that since not a single person at the Tax Department could explain what would or would not be taxed, then it already failed a major test — taxes should be easy to administer and easy for taxpayers to understand,” Ashe wrote in the email.
“Quite frankly, I still believe that is the case.”
Ashe sponsored legislation to exempt cloud-based software users from a sales tax in 2015
“I continue to not support applying this tax, and will try to convince my colleagues to maintain the Senate’s historical position,” he wrote.
If the Senate struck down the House’s cloud tax proposal, it’s unclear whether lawmakers would be able to agree upon a new long-term clean water funding source by the end of the legislative session, which is scheduled to end this week.
The House’s plan involves using the new cloud tax to help replace about $7.6 million of meals and rooms tax revenue from the education fund that would be permanently dedicated to clean water projects.
Those pushing for the new levy say now that 17 other states that have collect similar cloud software taxes, and online software use has become much more common, the new sales tax won’t lead to a competitive disadvantage in Vermont.
“We feel that this is the time to move to tax that prewritten software no matter how it’s delivered,” the House Ways and Means chair, Rep. Janet Ancel, D-Calais, said last week.
Kit Norton contributed reporting.
